Gas line hopes fizzle, but summer may bring plan

Posted: Monday, May 16, 2005

Alaska lawmakers' hopes were high early on that this would be the legislative session that they signed a contract for a North Slope gas pipeline.

Those hopes had fizzled by the end of March. The session ended Tuesday with no contract in hand, state negotiators still in talks with two groups and a late entry pitching a completely different pipeline plan.

As much as some legislators had wanted the chance to approve fiscal terms for what would be largest construction project in North America - estimated to cost about $20 billion - the delay is not a bad thing, Gov. Frank Murkowski said.

"We've never had anyone come forward with one proposal. Now we have three proposals. We've come a long way," Murkowski said.

"We have an obligation to consider all of the proposals and we will consider them all. I will not be rushed into it."

The governor said negotiations could end this summer with the release of one or more contract proposals. They would go out for a 30-day public review, changes would be made if necessary and the Legislature would be called in for a special session to approve or reject the proposal.

If a contract is signed this year, gas could start flowing through the line between 2012 and 2014, Murkowski said.

The first group with which the state started negotiating is a consortium of the three largest North Slope oil producers: ConocoPhillips, Exxon Mobil and BP. TransCanada later applied.

Both groups would tap into the estimated 35 trillion cubic feet of gas reserves beneath the Arctic tundra and ship it through a steel underground line that runs through Canada and to markets in the Midwest.

About a month ago, a third group entered the mix with a drastically different plan and a very visible public relations campaign to go with it.

The Alaska Gasline Port Authority wants to run a line from the North Slope to Valdez, where the gas would be liquefied and shipped to the West Coast. The group says it has a buyer and it has been running full-page newspaper ads and television commercials promoting the line and the jobs it would bring the state.

Murkowski said he wants to have all three proposals at the same level of analysis before evaluating them and submitting one or more to the Legislature.

Detractors accuse him of pondering too long.

"We still have the chance to do something big, but the governor has been afraid to seize the chances in front of us," said House Minority Leader Ethan Berkowitz, D-Anchorage. "In search of the perfect deal, he has let some good ones get away."

There will be a gas pipeline, Berkowitz said, but Murkowski may not be the governor to close the deal.

"This administration has less than two years to go," he said. "The next administration will give you a gas pipeline."

Murkowski's term ends in 2006 and he has not publicly said whether he is considering running for re-election.

Criticism will come from uninformed legislators, Murkowski said.

"The realization is those legislators have never been cleared for the confidential screening that was necessary to have them knowledgeable," he said. "If you ask the few legislators who have been apprised ... I think they would dismiss this criticism."

Legislative Budget and Audit Committee Co-Chairman Gene Therriault, R-North Pole, said those who thought a gas line deal could be completed by the end of the regular session may have been overly optimistic. He and the committee's other co-chairman, Rep. Ralph Samuels, R-Anchorage, receive regular updates from state negotiators on the talks' progress.

"I pretty much knew early on that it was unlikely we would get a proposal or proposals this session," Therriault said.

Therriault said his committee also wants to see the three proposals at the same level to understand the costs and benefits of each before having to make recommendations to the Legislature or suggested changes to the governor.

There also could be room to collaborate on two or more of the projects, he said.

Bound by confidentiality agreements, none of the groups is willing to speak in detail about the negotiations, although all say the talks are progressing.

David MacDowell, spokesman for BP Exploration (Alaska) Inc., said the producers have four conditions that must be met before going to the next level. The first, federal regulations, was met with a law passed by Congress last year. He said the group is confident the threshold of the second, reducing the cost of building the pipeline, will be met.

What remains is coming to fiscal terms with Alaska and establishing a regulatory process for the Canadian portion of the line, MacDowell said.

MacDowell said the group believes an acceptable regulatory process exists already in Canada, but they need confirmation from the Canadian government.

Locking up the tax and tariff structure with the Alaska government and negotiating a partial ownership stake for the state is more delicate.

"We need confirmation on the Canadian side, but clearly the fiscal contract negotiations with the state of Alaska are critically important," MacDowell said.



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